Key Takeaways
Vistage's second-quarter CEO Confidence Index showed that small business leaders' sentiment toward the U.S. economy has weakened from the previous quarter. CEOs are feeling the effects of rising inflation and interest rates, according to the executive coaching firm's latest confidence index released Wednesday. Many CEOs said they are investing in or already using artificial intelligence (AI).
Small business CEOs are less confident about the economy than they were earlier this year.
Vistage's CEO Confidence Index fell to 83.3 in the second quarter, down from 85.9 in the first quarter. Vistage said the drop in confidence was due in part to rising inflation and interest rates. To tame record inflation, the Federal Reserve has raised interest rates from near zero to above 5% over the past two years.
CEOs believe rising inflation and interest rates are hurting their companies
The majority of CEOs surveyed (64%) say rising interest rates are hurting their business. Despite this, 60% still expect revenue to increase over the next 12 months.
Although inflation has now settled at 3%, down from over 9% in the summer of 2022, businesses are still feeling the impact of rising prices, including higher labor costs and raw material costs. 59% of respondents said labor costs were the biggest cause of inflation affecting their business, while 12% attributed it to rising raw materials, 9% to equipment and 8% to rising service costs.
Although CEOs said labor costs are rising, many did not expect their companies to reduce their workforces: Only 10% believe their company's total workforce will shrink in the next 12 months.
Many CEOs say they are increasing investments in AI capabilities
Looking to the future, respondents are optimistic about AI and its potential to improve employee productivity, with nearly a third of CEOs in Vistage's survey saying they are increasing their spending on AI, although the majority of respondents (55%) said their AI budgets are remaining the same.
Some CEOs believe AI isn't just a tool for the future: their companies are already using it: 49% say they are using AI in sales and marketing, 33% to improve operational efficiency, and 23% for customer service.
Vistage, an executive coaching firm for small and medium-sized businesses, has been measuring the confidence of top small business executives in the U.S. economy since 2003 with its quarterly CEO Confidence Index.